D.C. Circuit Tosses Republican SEC Suit

     (CN) – A legal misstep over jurisdiction dooms a Republican challenge to an SEC rule that blocks investment advisers from making pay-to-play political contributions, the D.C. Circuit ruled.
     The Republican parties of New York and Tennessee sued the Securities and Exchange Commission last year, claiming its political contribution rule unconstitutionally prohibits “certain investment advisers and certain of their officers and employees from making contributions to political party committees,” according to their lawsuit.
     Regulators adopted the rule five years ago after investigations found pay-to-play schemes in the selection of pension-plan investment advisers for several large pension portfolios. In one case, an investment-management firm won business from the New York Common Retirement Fund by paying kickbacks to advisers of the state’s comptroller.
     To limit this kind of unethical activity, the SEC rule prohibits investment advisers from working for a government entity if they have made a political contribution to officials of that entity in the last two years.
     U.S. District Judge Beryl Howell dismissed the Republican parties’ challenge for lack of jurisdiction last year because the sole authority to review SEC rules rests with the D.C. Circuit. In other words, she found that the groups should have bypassed the district court and filed directly with the D.C. Circuit.
     The D.C. Circuit affirmed Howell’s decision Tuesday, ruling that a mistake made by the Republicans left their claims barred by the statute of limitations.
     “Such challenges must be brought in this court within sixty days of promulgation of the rule, and there are no grounds for an exception in this case: The law governing where to file was clear during the limitations period, and the length of time the statute affords for pre-enforcement review is adequate,” Judge Nina Pillard wrote for a three-judge panel.
     The appeals court rejected the Republicans’ arguments that precedent establishing its direct review of SEC rules is confusing.
     “Investment Company [Institute v. Board of Governors of the Federal Reserve System] explains that ‘[i]f any doubt as to the proper forum exists, careful counsel should file suit in both the court of appeals and the district court or . . . bring suit only in the court of appeals,'” Pillard wrote. “Plaintiffs have not explained why they failed timely to file such a protective petition, other than to assert that they thought the controlling law was unclear. The Investment Company presumption is not new and should not have caught plaintiffs unawares.”
     Pillard and the panel declined to toll the statute of limitations to allow the Republicans’ challenge to proceed.
     “Legions of litigants have timely filed their petitions for review of rules adopted by the commission and other agencies with similar direct-review provisions. A litigant’s own ‘tactical mistakes’ and ‘inauspicious legal judgments’ do not amount to an ‘extraordinary obstacle’ sufficient to warrant equitable tolling,” the judge wrote.

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